TaxTMI 
TaxTMI 
TaxTMI 
2020 (11) TMI 897
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...., Ludhiana. From the documents seized during such action it was found by the Investigation Wing and subsequently by the Central Circle, Ludhiana that Sh. Sanjeev Gupta director of aforesaid companies along with its brokerage concern M/s. S. G. and Co., in collusion with some of the brokers of the Ludhiana Stock Exchange such as M/s. Pee Kay Khanna and Co., M/s. Pawan Puri and Co and M/s. Singhania and had indulged in money laundering and in giving entries of capital gains to various persons. Based on the aforesaid information notice under section 158BC was issued to the assessee, in response to which he filed a return declaring undisclosed income of Rs. nil. From the perusal of assessment records of the assessee, the Assessing Officer noted that the assessee had shown capital gains during the assessment year 1998-99 on account of purchase/sale transactions of shares of M/s. S. G. Global Exports Ltd. The Assessing Officer further noted that the assessee had shown purchase of 62,500 shares for Rs. 97,000 at the rate of Rs. 1.50-1.55 per share on November 11, 1997 and sold shares on March 27, 1998 for Rs. 10,93,350 at Rs. 17.50 per share. And the capital gains of Rs. 9,97,500 thus ha....
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....rom his undisclosed sources. Thus, total addition of undisclosed income Rs. 10,17,450 was accordingly made in order passed under section 158BD read with section 158BC of the Act. 3. The matter was carried in appeal before the learned Commissioner of Income-tax (Appeals) where the assessee challenged the order passed raising both legal grounds challenging the assumption of jurisdiction by the Assessing Officer under section 158BD of the Act and also on the merits of the case. The learned Commissioner of Income-tax (Appeals) dismissed all the grounds raised by the assessee and upheld the order of the Assessing Officer, dismissing the appeal filed by the assessee. Aggrieved by the same, the assessee has come up in appeal before us raising the following grounds : 1. That the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in opening the case under section 158BD of the Income-tax Act, 1961. 2. That the learned Commissioner of Income-tax (Appeals) has erred in not considering that the action of the Assessing Officer in opening the case under section 158BD was bad in law as conditions precedent for invoking the provisions of s....
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....such third person so as to proceed against such person. The learned counsel for the assessee has contended that there was never any material in the possession of the Assessing Officer of the searched person relating to the assessee and in the absence of the same, therefore, there could not have been any satisfaction by the Assessing Officer of the searched person vis-a-vis any undisclosed income of the assessee unearthed during search and no incriminating material was passed to the Assessing Officer of the assessee and therefore, the assessment framed by the Assessing Officer in the present case was without any valid jurisdiction. The learned counsel for the assessee pointed out that even the Commissioner of Income-tax (Appeals) had admitted to the fact of absence of any incriminating material relating to the assessee either with the Assessing Officer of the searched person or with the Assessing Officer of the assessee. He further drew our attention to the copy of letter dated May 31, 2001 from the Assessing Officer of the searched person, i. e., Deputy Commissioner of Income-tax, Central Circle, Ludhiana placed at paper book page Nos. 1 and 2 before us, pointing out therefrom that....
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....he Assessing Officer of the searched person in assuming jurisdiction to frame assessment under section 158BD of the Act : (i) CIT v. Mechmen [2016] 380 ITR 591 (MP) in I. T. A. Nos. 44, 45, 48, 50, 53, 54 and 56 of 2011, Madhya Pradesh High Court order dated July 10, 2015. (ii) Parshwa Corporation v. Dy. CIT [2016] 46 ITR (Trib) 266 (Ahd) I. T. (SS) A. Nos. 68 to 73/Ahd/2012 dated September 11, 2015. 6. The learned Departmental representative on the other hand heavily relied on the findings of the learned Commissioner of Income-tax (Appeals) in this regard. He drew our attention to para 2.13 to 2.17 of the order as under : "2.13 I have carefully considered the appellant's submissions. I have also gone rough the assessment record. It is apparent from the reason recorded by the Assessing Officer that the information received by the Assessing Officer from the Director of Income-tax, Investigation Delhi was specific information. The information referred to the fact of accommodation entry through bank cheque. The bank account number and the name of the person from whom the amount was received was also specifically mentioned in the information. As such the information was no....
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.... the Act and there is no infirmity and illegality in issuance of notice under section 148 of the Act by the Assessing Officer. (assessment year 2006-07) (iii) Srinivasa Khandasari Udyog v. Second ITO [1996] 56 ITD 146 (Bang) (iv) ITO v. Puroshottam Das Bangur [1997] 224 ITR 362 (SC) (v) Elphinstone Picture Palace v. Union of India [1969] 74 ITR 115 (Patna) (vi) H. A. Nanji and Co. v. ITO [1979] 120 ITR 593 (Cal) (vii) Sohan Singh v. CIT [1986] 158 ITR 174 (Delhi). (viii) Rattan Gupta v. Union of India [1998] 234 ITR 220 (Delhi). Similarly, information received from other agencies like CIB, Enforcement Directorate or from other Assessing Officers constitute material for reopening of assessment and notice issued under section 148 in these circumstances is also valid. Reliance in this regard is placed on the following decisions : (i) CGT v. Smt. Susheela Shanmugasundaram [2000] 242 ITR 176 (Mad) (ii) ITO v. Smt. Gurinder Kaur [2007] 288 ITR (A.T.) 207 (Delhi) ; [2006] 102 ITD 189 (Delhi) (iii) Sterlite Industries (India) Ltd. v. Asst. CIT [2008] 302 ITR 275 (Mad) 2.14 Further reliance is placed on the decisi....
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....to proceed in case of the assessee. (iii) it did not take into cognizance additional evidence, i. e., an examination report/opinion of laboratory of the Government examiner of questioned documents, regarding the diary of broker and affidavit of broker. On Revenue's appeal : Held, In the instant case, the office note clearly indicated that there were entries, which might show undisclosed income of persons other than searched persons who were identifiable from the diary. Accordingly, due cognisance was being taken thereof for initiating proceedings for block assessment in those cases. The same meets the requirement for proceeding under section 158BD. It is clear from the language of section 158BD that if while considering the case of the searched persons, the material indicate undisclosed income at the hands of any other person, further action could be taken as stipulated therein. In the instant case, the Assessing Officer considering the case of the searched persons, found prima facie material to proceed against persons other than the searched persons and initiated proceedings. There is no compulsion to read any further requirement than what is mentioned as necessary for a....
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....#39; has to be recorded by the Assessing Officer to attain jurisdiction over non-searched person explained. The facts of the case are ; A search under section 132 was carried out in the premises of the Bhatia group on February 5, 2003 and certain incriminating documents pertaining to the assessee firm were found. The assessment on the Bhatia group was completed on March 30, 2005. Thereafter, on July 15, 2005, the Assessing Officer recorded his 'satisfaction' that the seized papers revealed the undisclosed income of the assessee and the said papers were passed on to the Assessing Officer of the asses see for making an assessment under section 158BC read with section 158BD. The assessee argued that the proceedings initiated again him were invalid as the said 'satisfaction note' was prepared after the proceedings in the case of the searched party were completed. The Assessing Officer and the Commissioner of Income-tax (Appeals) rejected the assessee's claim though the Tribunal and the High Court upheld it. The Tribunal and the High Court held that as the recording of satisfaction by the Assessing Officer as contemplated under section 158BD was on a date subsequen....
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....r along with the initiation of proceedings against the searched per son under section 158BC of the Act : (b) along with the assessment proceedings under section 158BC of the Act : and (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.' 2.16 Further, it is seen from the reason recorded by the Assessing Officer that the Assessing Officer applied his mind to this information by verifying the assessment record. Merely because the Assessing Officer has taken the action under section 158BD after receiving the information from Investigation Wing wherein the modus operandi of accommodation entries has been discussed in detail, it does not imply that there was no application of mind by the Assessing Officer. The facts remains that already the Assessing Officer when he passed on the information to the Assessing Officer concerned in the case of appellant dated May 30, 2001, had recorded all the relevant information in detail clearly bringing out the modus operandi of the per son where the search had taken place and its relevance in the case of appellant. Therefore the satisfaction of the Assessing Officer is based on pro....
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....as per section 158BC of the Act, was as per law. It is relevant to point out that the pro visions referred to relate to the assessment of undisclosed income of block period, in the case of search proceedings conducted, and while section 158BC of the Act relates to the manner in which undisclosed income of block period is to be assessed in case of persons searched, section 158BD gives power to assess the undisclosed income of the block period relating to a person who has not been searched but relating to whom incriminating material in relation to his undisclosed income is found during search proceedings conducted on other person. Briefly put, the provisions of section 158BD of the Act gives power to the Assessing Officers to assess undisclosed income of the block period of persons not subjected to search proceedings in the like manner as those who are subjected to search proceedings. In the present case jurisdiction has been assumed by the Assessing Officer under section 158BD of the Act. The contention of the learned counsel for the assessee is that the conditions outlined in section 158BD of the Act for assuming jurisdiction to frame assessment on a per son other than searched per....
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....the searched person to the Assessing Officer of the assessee. The provisions of section 158BD of the Act are very clear and are as under : "Section 158BD in the Income-tax Act, 1961 158BD. Undisclosed income of any other person.-Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly." 11. A bare reading of the provisions of the Act clearly bring out that for the assumption of jurisdiction under section 158BD of the Act it is a necessary prerequisite for the incriminating material relating to the third person being handed over to his Assessing Officer by the Assessing Officer of the searched person,. The section clearly states the handing over of all material relating to the third ....
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....ovt. of A. P. [2006] 13 Scale 27, it was held : 'In a case of doubt or dispute, it is well-settled, construction has to be made in favour of the taxpayer and against the Revenue.' In lspat Industries Ltd. v. Commissioner of Customs [2006] 7 RC 546 (SC) ; [2006] 12 JT 379 (SC) ; [2006] 9 Scale 652, this court opined : 'In our opinion if there are two possible interpretations of a rule, one which subserves the object of a provision in the parent statute and the other which does not, we have to adopt the former, because adopting the latter will make the rule ultra vires the Act.' Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 6th February, 1996 satisfies the requirements of section 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Officer. Documents and other assets recovered during search had not been handed over to the Assessing Officer having jurisdiction in the matter. No proceeding under section 158BC had been initiated. There is, thus, a patent non-application of mind. A prescribed form had been utilized. Even the status of the....
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.... [2007] 289 ITR 329 (Ker) ; [2006] 205 CTR 500 (Ker) and by the Madhya Pradesh High Court in CIT v. Smt. Maya Chotrani [2007] 288 ITR 175 (MP). We may, however, notice that Mr. A. K. Chitale, relied upon a decision of the Delhi High Court in CIT v. Ms. Pushpa Rani [2007] 289 ITR 328 (Delhi) ; [2005] 193 CTR 256 (Delhi), wherein a Division Bench of the said court held : '. . . . The Tribunal on the material placed before it, arrived at a conclusion that there were no search warrants in the name of the assessees and hence it accepted the contention of the learned counsel that the proceedings initiated under section 158BC in the cases of the assessees were ab initio void and without jurisdiction. The learned counsel for the Department was unable to furnish any clarification and stated before the Tribunal that the facts stated by the assessees regarding non-issuance of the search warrants in the case of the two ladies were correct. It is in view of this that the Tribunal has held that unless a search warrant is issued, the Assessing Officer cannot invoke the provisions of section 158BC for initiation of block assessment proceedings under Chapter XIV-B. However, so far as the ba....
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....ted during search and opinion of the Assessing Officer of the searched person based on that information. There is no mention of any seized material, relating to the persons listed in the communication having allegedly availed of "hawala entries" of long-term capital gains, being handed over along with the said communication. The satisfaction recorded by the Assessing Officer of the assessee for assuming jurisdiction under section 158BD of the Act, dated June 28, 2001, placed at paper book page No. 3 also reveals that the satisfaction of undisclosed income of the assessee was recorded merely on the basis of information "supplied by the Assessing Officer of the searched person as referred to above". This satisfaction note also does not refer to any incriminating material forming the basis of the satisfaction of the Assessing Officer but on the contrary categorically mentions the satisfaction being arrived on the basis of information supplied by the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, i. e., the Assessing Officer of the searched person. Further the communication of the Assessing Officer of the searched person dated April 10, 2003 asking for the seized materi....
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....earched person, as per section 158BD of the Act, so as to enable him to assess the undisclosed income of the assessee. In the absence of the basic documents evidencing accommodation entry being provided to the asses see, the bank account number or the person from whom entry received can be of no assistance to the Assessing Officer of the assessee for assessing the undisclosed income of the assessee. Therefore in the present case even specific information was not passed to the Assessing Officer of the assessee as contended by the Revenue and therefore the contention that passing on of specific information constituted or was equivalent to handing over seized material, merits no consideration and is rejected. 13. In the light of the aforesaid fact and considering the mandate of section 158BD of the Act as interpreted by the hon'ble Supreme Court in the case of Manish Maheshwari (supra), the assumption of jurisdiction by the Assessing Officer in the present case under section 158BD of the Act we hold was not as per law. The assessment framed as a consequence thereof is void and accordingly is quashed. Ground of appeal Nos. 1, 2 and 3 are accordingly allowed. 14. Ground of appeal ....